The Hindu Business Line : Maruti share may be priced Rs 122-125

THE overwhelming response for the Maruti Udyog Ltd's initial public offer (IPO) has resulted in the Inter-Ministerial Group (IMG) deciding to recommend a cut-off price in the range of Rs 122-125 for a Rs 5 share against the floor price of Rs 115 set by the Government while inviting bids from investors during the book-building process.

Along with this, the IMG has also decided to suggest that the Government should exercise the 10 per cent green-shoe option while at the same time reserving a higher proportion of the issue for retail investors by setting aside up to 32 per cent of the IPO for the small investors who have applied for more than 1,000 shares instead of the earlier limit of 25 per cent.

With the exercise of the green-shoe option, the total number of shares from the Government's holding that would now be put on the block in the disinvestment process would go up to 7.9 crore, instead of the original offer of 7.2 crore.

The total proceeds for the Government based on the indicative cut-off price would be in the range of Rs 950-1,000 crore.

After the completion of the offering, the Government's holding in the car joint venture with Suzuki Motor Corporation would come down to 20.8 per cent.

The issue, which had opened for subscription on June 12 and closed on June 19, was oversubscribed by almost 10 times. The IMG comprising Secretary-level officials from the Ministries of Disinvestment, Finance, Heavy Industries and Law met here on Friday to finalise and recommend the basis of allotment and price of the shares of Maruti.

The IMG is believed to have recommended a higher allocation of shares to retail investors in order to broad-base the shareholding in the joint venture car maker which has a share of more than 50 per cent of India's car market. Japanese Suzuki Motor Corporation holds a majority stake of 54.2 per cent in Maruti.

Apart from a 32 per cent allocation to retail investors, 15 per cent of the total offer would be given to high networth individuals who have submitted bids for more than 1,000 shares.

The remaining shares would be allocated to qualified institutional investors, according to sources involved in the disinvestment of Maruti.

The recommendations of the IMG were forwarded to the Union Disinvestment Minister, Mr Arun Shourie, for his approval.

Mr Shourie is scheduled to announce the details of the IPO including the price and the allotment of shares to various categories of investors on Saturday.

The Government had ceded management control of Maruti to Suzuki last year through a Rs 400 crore rights issue for a consideration worth Rs 1,000 crores.

As per the revised joint venture agreement, the Government will sell its residual holding of 45.8 per cent in Maruti through a public offer of shares in two stages — a 25 per cent sale of shares in the first phase and the remaining in the second stage - to exit from the company totally.

Convention given the go-by

THE convention of obtaining clearance from the Cabinet Committee on Disinvestment (CCD) for finalising the price of Government shares being sold in PSUs appears to have been given a go-by in the case of Maruti Udyog Ltd (MUL).

With the possibility of convening a meeting of the CCD within the stipulated 15-day period prescribed by SEBI for listing a scrip after closing of a public issue appearing remote, the Government is understood to have authorised Mr Shourie to decide on the matter. ``The Minister will make an announcement on the Maruti public offer on Saturday,'' a top Disinvestment Ministry official said.

The official said that the Government may miss the 15-day deadline for listing stipulated by SEBI if all the formalities associated with the Government decision-making are adhered to.

Incidentally, the Prime Minister, Mr A.B. Vajpayee, who heads the CCD, is embarking on a 7-day visit to China beginning June 20.

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